MarketCulture Blog – Using a Customer Culture for Competitive Advantage

Wells Fargo’s challenges over the past few years have been well documented. It took a turn for the worse when it created an aggressive sales culture based on unrealistic targets.

To meet sales targets, employees opened accounts customers did not need, ordered credit cards without their permission and even forged customer signatures on paperwork.

The result was the creation of 3.5 million fake customer accounts many of which were then billed fees. Further investigations produced evidence that 570,000 customers had been sold car insurance they didn’t need.

These were failures of culture, leadership and ultimately risk management practices, something the bank had prided itself on during the mortgage crisis of 2008.

In 2017, the Institutional Shareholder Services (ISS), an influential shareholder advisory group released the following statement:

“The board failed to implement an effective risk-management oversight process in a timely way and that could have mitigated the harm to its customers, its employees and the bank’s reputation.”

It also suggested shareholders vote against the re-election of 12 of the 15 directors.

Most of the board was replaced over the next 12 months and Tim Sloan, the new CEO was tasked with cleaning up the mess.

To his credit, he did a lot of work with his top team to reshape the vision, values, and goals around the core idea of “helping customers succeed financially”. He also began to signal a shift in leadership focus away from shareholders:

“When you put your shareholders first—I hope Warren Buffett isn’t listening by the way—but when you put them first, then you’re going to make mistakes because you’re going to make short-term decisions that aren’t focused on creating a long-term, successful company.”

Sloan began dismantling the sales incentives that created the bad behavior and stopped paying employees on how many products they sell. Instead, they shifted the metrics to how often customers used their accounts and a range of customer experience metrics.

However, as with all changes, the devil is in the detail and employees had begun raising concerns again about customer-unfriendly practices emerging. A report by the Committee for Better Banks highlighted a continued culture of fear in which front line employees were not engaged in the change process but instead had it imposed on them.

“Honestly, it’s perceived as a joke — ‘Oh yeah, they’ve changed things,’ ” said Meggan Halvorson, 35, who works in Wells Fargo’s private mortgage banking division in Minneapolis. “I haven’t met anybody, personally, who believes what they’re saying or that it’s the case.”

Unfortunately, this has all been too little too late at least for Tim Sloan who was pressured into early retirement in early 2019.

In his final statement as CEO to the House Financial Services Committee he stated:

“We have more work to do, and that is an ongoing commitment by all of Wells Fargo’s 260,000 team members — starting with me — to put our customers’ needs first, to act with honesty, integrity, and accountability; and to strive to be the best bank in America.”

Within a month he would be gone.

What are the lessons?

Intensity and Velocity Matters

Changes need to be led with intensity and purpose from the top team throughout the organization. One of the reasons Tim Sloan was pressured into early retirement was that changes were not happening fast enough. There is a level of intensity and engagement required by the CEO to shift culture, and this is particularly important when the culture has gone bad.

Personally, “seeing the front.”

This term comes from the military and is based on the idea that leaders must see what is happening at the front lines themselves before making crucial decisions. The front line must be engaged in the process, the people doing the work matter and the daily interactions customers have with those people determine how the brand is perceived over time.

If change is imposed from the top, it is naturally resisted. The result is that employee initiative gets squashed, ownership is destroyed, and people keep their heads down out of fear of losing their job. In short, you get compliance, the bare minimum out of people.

If more direct attention had been paid to the front lines at Wells Fargo it would have been clearer what needed to happen to improve the customer and employee experience. If done correctly this will result in better business performance.

Metrics can help or hurt.

How people are measured can result in behavior that improves the customer experience or works against it. Clearly, the unrealistic sales targets at Wells Fargo resulted in the wrong behavior, that does not mean sales targets are bad; they are a necessary part of driving business performance. However, the way in which they are implemented matters.

Likewise, measures of customer experiences can be used in the right way or the wrong way. If they are used to performance manage, as a “stick,” they result in fear and resentment. Ironically, this works against the very thing they were designed to do which is to improve the customer’s experience. These metrics must be designed as learning tools that help employees develop and grow. This creates an environment that unleashes most people’s natural desire to deliver great experiences for their customers.

Transforming a company’s culture begins with a genuine desire by the top leadership to make things better. However, it then must be followed with concrete action by leaders at all levels.

If you want to catalyze customer-centric change across your organization, start by measuring how customer-centric you are today with the world’s only customer-centric culture benchmark, the Market Responsiveness Index.